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Macron’s Answer to Trump’s Threat: Europe Won’t Block Huawei

(Bloomberg) -- Donald Trump’s latest offensive against China’s Huawei Technologies Co. puts Europe in an even bigger bind over which side to pick, but France’s Emmanuel Macron is holding the line.

With a stroke of his pen, the U.S. president signed an executive order to curb the Chinese telecom giant’s access to the U.S. market and American suppliers. His action could affect Europe, already caught in the cross hairs of a trade war, because it could impede the global roll-out of the fifth-generation networks.

In the first public comments by a European leader since Wednesday’s move by Trump, Macron told Bloomberg Television he doesn’t intend to capitulate to U.S. pressure to block Huawei’s 5G equipment. France, Germany and the U.K. are among the key allies balking at American demands to shut Huawei out completely from 5G network construction -- or risk retribution.

“Our perspective is not to block Huawei or any company,” Macron said at a technology conference in Paris. “France and Europe are pragmatic and realistic. We do believe in cooperation and multilateralism. At the same time, we are extremely careful about access to good technology and to preserve our national security and all the safety rules.”

Macron’s remarks reflect the mood across the region. While Germany plans to tighten the rules governing the security of its telecom networks, Chancellor Angela Merkel has made it clear she won’t single out any one supplier. The U.K., which has yet to announce a decision, is considering excluding Huawei equipment from the network’s core, which houses control functions, while allowing it to supply antennas and other parts for less-sensitive functions, people familiar with the matter said last month.

Allies Split

The U.K.’s eventual decision on Huawei could differ from Europe’s, Jeremy Wright, the country’s secretary of state for digital affairs, said in an interview with Bloomberg Television, adding that although the U.K. listens to its allies, it “needs to make its own decisions” on whether to allow Huawei as a core telecom equipment supplier.

The U.K. is near the end of a review of its telecom supply chain. People familiar with the matter told Bloomberg last month that Britain is poised to toughen the rules under which Huawei operates in the country, while stopping short of an outright ban.

The U.K.’s eventual decision has taken on added significance with the ongoing Brexit negotiations, and the imminent arrival of Trump, who will embark on a state visit at the start of June, and celebrate the 75th anniversary of the D-Day landings.

With Prime Minister Theresa May’s time in office looking limited, the decision could be delayed until her successor is chosen, or reversed by them when they arrive.

Supply Chain

U.S. suppliers to Huawei including Lumentum Holdings Inc. and Qualcomm Inc. are indicated to open lower, after shares in Asian suppliers including Sunny Optical Technology Group Co. and AAC Technologies Holdings Inc. tanked on Thursday. In Europe, STMicroelectronics NV fell, while Huawei competitor Nokia Oyj gained. Huawei has said it devotes about a third of its budget -- some $11 billion annually -- to the acquisition of American components. It counts 33 U.S. companies among its top 92 suppliers.

Huawei has repeatedly denied that its equipment contains backdoors for Chinese state-ordered espionage. The Shenzhen-based company is willing to come up with ways to ensure that its products are secure and is committed to foster dialogue with Europe, it said in an emailed statement Thursday.

“In past 30 years, Huawei hasn’t had any cyber security issues,” Vincent Pang, who heads Huawei’s western Europe business, said in a speech at the Paris tech conference on Thursday. “Closed doors doesn’t make it better for anybody.”

The U.S. conflict with China has been likened to the Cold War with the Soviet Union. For Europe, it’s a delicate balancing act that has leaders trying to honor the close partnership with the U.S. with a desire to increase business with China, its second-largest trading partner.